US Beats China As Germany’s Biggest Trading Partner; Berlin Cuts Reliance On Beijing Amid Geopolitical Tensions

According to preliminary data from Germany’s statistics office, the United States surpassed China to become Germany’s largest trading partner in the first half of 2024.

This marks a notable realignment as Berlin continues its efforts to reduce reliance on Beijing amidst ongoing geopolitical tensions and economic fluctuations.

From January to June 2024, trade between Germany and the US reached approximately 127 billion euros ($139 billion). In contrast, Germany’s trade with China amounted to around 122 billion euros.

This marks a substantial change from previous years, where China consistently held the top spot as Germany’s foremost trading partner, a position it retained for eight consecutive years until the end of 2023.

The change in trading patterns underscores Germany’s strategic move away from China, influenced by political disagreements and worries about what Berlin characterizes as “unfair practices” by Beijing.

Earlier this year, a German government report forecast that changing geopolitical situations and a sluggish recovery in China’s economy would allow the United States to surpass China as Germany’s leading trading partner.

The report noted that the economic paths of the US and China were diverging significantly. While China’s recovery remained stalled, the US economy was performing better than anticipated, contributing to this shift in trade relationships.

Lola Machleid, a foreign trade expert at the German Chamber of Industry and Commerce (DIHK), also attributed the increase in US trade to the robust performance of the American economy.

German exports to the US surged by 3.3%, totaling nearly 81 billion euros in the first half of the year. Conversely, trade with China saw a decline, with exports dropping by almost 3% to just over 48 billion euros.

Imports also reflect this shift. German imports from China fell by nearly 8%, settling at 73.5 billion euros.

Meanwhile, imports from the US decreased by 3.4% to 46.1 billion euros, buoyed by the supply of energy commodities.

Machleid highlighted the uncertainty surrounding future trade patterns, noting that geopolitical instability and fluctuating economic conditions in the US and China, as well as within Germany, made it challenging to predict how these trends would evolve.

Germany Reassesses Ties With China Amid Rising Tensions

Over recent decades, Germany and China have cultivated an exceptionally close economic relationship, characterized by a surge in bilateral trade and substantial investments from German manufacturing firms into China, the world’s second-largest economy.

Since 2016, Beijing has been Germany’s top trading partner, a testament to the deepening economic ties between the two nations. Germany has been a key player in trade between China and the European Union, but the competitive environment has changed.

Growing geopolitical tensions, rising compliance costs, and China’s policies favoring domestic businesses have prompted Berlin to reassess and reduce its dependency on Beijing.

In 2023, the German government unveiled its first national strategy on China, defining the Asian superpower as a “partner, competitor, and systemic rival.” This new strategy aimed to decrease Germany’s reliance on Chinese goods while preserving the substantial economic connections that amounted to hundreds of billions of dollars.

The policy includes measures such as export controls and investment screenings for German companies operating in China, intended to safeguard sensitive technology and intellectual property.

Yet, the strategy fell short in detailing how Berlin would handle Chinese investments in Germany, a gap that has recently raised concerns.

German businesses operating in China face myriad challenges, including intensifying competition from local firms, uneven market access, economic uncertainties, and geopolitical risks.

Further, Chinese companies have become more competitive, particularly in the industrial and automotive sectors, raising the bar for German firms. Despite these obstacles, major German corporations continue to invest heavily in China to maintain their market position and shield their operations from growing geopolitical strains.

Nevertheless, a report by Allianz Trade in April revealed that, despite the difficulties, China remained an appealing investment destination for large German corporations. The report noted that direct German investment in China increased five-fold from 2010 to 2022, reflecting ongoing interest despite a more challenging environment.